The employment situation in Latin America and the Caribbean

Transcription

1 Septemer 2009 ECLAC / ILO Bulletin The employment sitution in Ltin Americ nd the Crien Crisis in the lour mrkets nd countercyclicl responses Contents Foreword... 1 Introduction... 3 A. In the second qurter of 2009, the impct of the crisis on lour mrkets deepens... 4 B. Generl overview for the first hlf of C. Pulic investment nd emergency employment progrmmes s mens of tckling the crisis D. Conclusions Biliogrphy Sttisticl nnex In this second ulletin, ECLAC nd ILO show how the impct of the crisis hs deepened in lour mrkets in the region in the first hlf of the yer. Foreword As predicted in the first ulletin, produced jointly y the Economic Commission for Ltin Americ nd the Crien (ECLAC) nd the Interntionl Lour Orgniztion (ILO), the impct of the economic crisis continued to e felt in Ltin Americ nd the Crien during the second qurter of Regionl exports of goods nd services contrcted in response to sluggish demnd on interntionl mrkets, while remittnces nd foreign direct investment flows continued to fll, credit lost its uoyncy nd the totl wge ill diminished, owing minly to jo losses. As result, the growth forecsts of mny countries hd to e djusted downwrds. Since the end of 2008, the countries of the region hd strted to implement countercyclicl policies leit with significnt differences in n effort to use pulic spending to counter flgging investment nd consumer-spending levels nd oost ggregte demnd. In this second ulletin, ECLAC nd ILO show how the impct of the crisis hs deepened in lour mrkets in the region in the first hlf of the yer nd exmine existing options nd the outcome of pulic-infrstructure nd emergency employment progrmmes designed to mitigte the impct of the crisis on the lour mrket. The unemployment rte hs risen in prcticlly ll countries compred with the previous yer nd this sitution worsened further in the second qurter, when urn unemployment exceeded the rte of the corresponding period in 2008 y 1 percentge point (to stnd t 8.5%, up from 7.5%), while in the first qurter, the vrition ws 0.6 of percentge point. Lour indictors lso point to n increse in informlity, decline in employment with socil protection nd decrese in full-time employment. Lour-mrket trends oserved in the first hlf-yer, together with the forecst for 1.9% decline in regionl GDP in 2009, suggest tht the verge nnul rte of urn unemployment in the region will e close to 8.5%. This forecst is slightly less pessimistic thn the estimte given in the first ulletin; this is ttriutle to the fll in the prticiption rte in the first hlf-yer to levels tht re expected to remin low for the rest of the yer. Without this reduction in the lour supply, due lrgely to the discourgement effect, the nnul verge urn unemployment rte would stnd t etween 8.8% nd 8.9%. Thus, the open urn unemployment figure would increse y 2.5 million nd if the discourged jo-seekers re included, then the numer of dditionl persons not finding niche in the urn lour mrket would clim to 3.2 million.

2 2 ECLAC / ILO Bulletin In the region, s in the rest of the world, there re signs tht the crisis my hve reched ottom in the middle of the yer. In mny countries, production levels hve cesed their decline nd there re indictions of n incipient recovery leding to cutious optimism tht there my e moderte upturn in lour mrkets in the fourth qurter. The pce of recovery will vry from one country to the next nd is expected to e grdul t est. Even with the return to growth pth, there should e no illusion tht the lour prolems will immeditely dispper. First, the recovery in employment is expected to lg ehind the upturn in economic ctivity. Second, since economic growth is likely to remin moderte in the short term nd well elow the rtes recorded etween lte 2003 nd mid-2008, demnd for lour nd consequently the genertion of good-qulity jos will continue to e wek. Thus, countries should not relx their efforts to defend nd crete decent jos, ut rther should tke steps to improve the effectiveness nd efficiency of ville instruments. In this wy, the region will e in etter position not only to confront the chllenges of economic recovery, ut lso to strengthen the foundtions for socil inclusion nd for dvncing under more fvourle conditions towrds fulfilment of the Millennium Development Gols Jen Mnint Director ILO Regionl Office for Ltin Americ nd the Crien Alici Bárcen Executive Secretry Economic Commission for Ltin Americ nd the Crien (ECLAC)

3 ECLAC / ILO Bulletin 3 Introduction The second qurter of 2009 sw continution of the signs of economic decline descried in the first Bulletin on the employment sitution in Ltin Americ nd the Crien, prepred jointly y the Economic Commission for Ltin Americ nd the Crien (ECLAC) nd the Interntionl Lour Orgniztion (ILO). One such sign ws the worsening of the lour mrket s min employment nd underemployment indictors s result of the crisis. 1 However, the first suggestions of recovery in the lour mrkets my e perceptile in the lst few months of the yer, prtly s result of the countercyclicl policies implemented in mny of the region s countries. This second ECLAC/ILO Bulletin seeks to descrie the impct of the economic decline on lour mrkets, eginning with rief review of urn employment nd unemployment trends in the first nd second qurters of The Bulletin then presents more detiled review of the min chnges in the lour mrket in the first hlf of 2009, in reltion to the first hlf of The finl section highlights progress in the execution of pulic investment nd emergency employment progrmmes, s prt of countercyclicl policy pckges. In the second qurter, jo cretion cpcity (ccording to sesonlly djusted mesurements) gin fell in most countries (which is why employment rtes re lower in most cses thn in the second qurter of 2008). As result, the urn unemployment rte showed more drmtic yer-onyer increse in the second qurter thn in the first. Indictors for countries tht crry out monthly surveys show tht the min cost of economic decline in the first hlf of 2009 hs een reduction in lour demnd, with slowdown in the growth of wged work in prcticlly ll countries with informtion ville. The open unemployment rte hs therefore risen to 8.5% (compred with 7.7% in the yer-erlier period). This rise would hve een lrger, hd the prticiption rte not dipped slightly s result of reduced lour prticiption mong young people, while the long-term upwrd trend of lour prticiption mong women continued. However, this hs not een the only dverse effect on employment nd decent work conditions, s there re signs of deteriortion in jo qulity. This is reflected in less dynmism of socil-security protected employment nd in wht seems to e trend towrds more informl employment, which cn lso e seen in rise in own-ccount working in response to the decline in wged employment. 1 The urn employment sitution is nlysed using most indictors for group of nine Ltin Americn countries tht crry out monthly or qurterly surveys nd tht represent lmost 95% of regionl GDP nd 89% of the urn economiclly ctive popultion (EAP). For some vriles, informtion ws lso ville for three Crien countries. An dditionl cost of economic decline hs een the losses in terms of working time, which cn e seen in incresed underemployment resulting from n insufficient numer of hours for people working short dy (ut wishing to work more hours). Young people hve pid high cost in the crisis or economic downturn, s youth unemployment hs shot up. It seems tht this is discourging young people from seeking work, s their prticiption rtes hve dropped, lthough clerly this my lso result in more young people stying on in the eduction system. Although the rise in unemployment hs een greter mong men, unemployment rtes nonetheless remin higher mong women. The dt lso show continution in the longterm upwrd trend in the femle prticiption rte, while the mle prticiption rte decresed. In the context of crisis tht originted rod to ffect ll the region s countries in vrying wys, there re significnt differences oth in the lour impcts of this crisis, nd the outlook for the coming months. This is clerly demonstrted y comprison etween the region s two lrgest economies: Brzil nd Mexico. Owing to its high level of integrtion with the United Sttes economy, the lour mrket in Mexico hs een hit the hrdest nd the most quickly y the crisis, nd there is no sign of imminent recovery ccording to the informtion on economic growth or lour dt from the second qurter. For Brzil, on the other hnd, the crisis hd more limited impct on the lour mrket. In the first hlf of the yer, the numer of wged workers nd socil-security protected employment continued to grow yer-on-yer, nd recent dt indicte tht production is on the rod to recovery stimulted, in prt, y countercyclicl fiscl nd monetry policies. For the yer s whole, the unemployment rte in the region is estimted to rise from 7.5% in 2008 to 8.5% in This projection is slightly less pessimistic thn in the first ECLAC/ ILO Bulletin for two resons. The min djustment is due to the fll in the prticiption rte during the first hlf of the yer, the extent of which ws not predicted. Indeed, were it not for this fll (which my e lrgely due to scrce jo opportunities discourging joseekers), the unemployment rte would e etween out 8.8% nd 8.9%. The second, smller djustment reltes to the employment rte, which ws previously forecst to fll y 0.9 percentge points. In the first hlf of the yer, the yer-on-yer decrese ws 0.7 percentge points nd estimtes suggest tht the decrese could e lrger in the third qurter. However, the fourth qurter is expected to see smller fll, s result of the following two fctors. First, the regionl economy hs stilized nd is entering recovery prtly thnks to the countercyclicl policies introduced in mny countries, which

4 4 ECLAC / ILO Bulletin hs positive effect on the outlook for jo cretion. 2 Second, the region s lour mrkets hd lredy een hit y the crisis in the fourth qurter of 2008, which hs n impct on the levels for comprison. As result of the smller reduction in the rte during the fourth qurter, the employment rte is expected to fll y n verge of 0.8 of percentge point for the yer s whole. Section (c) of the Bulletin descries progress in implementing countercyclicl policies tht impct employment, specificlly pulic investment nd emergency employment progrmmes. Such investments nd progrmmes cn oth e extremely powerful tools if certin spects of their design, implementtion nd ssessment re tken into ccount. Mny of the region s countries hve used pulic investment to tckle the crisis nd crete jos y llocting dditionl resources, introducing dministrtive mesures to ensure fster pce of implementtion nd tking concrete steps to increse lour intensiveness in the projects eing crried out. As for emergency employment progrmmes, in severl countries they hve plyed less significnt role in this crisis thn in previous ones. As response to the effects tht the crisis hs on the lour mrket, the dvntges of these progrmmes re tht high percentge of resources is used for lour hiring nd they mke it possile to trget the most needy workers. Continued improvements in the design nd ppliction of pulic-investment nd emergency-employment progrmmes re therefore key element in etter moderting the impct of the current crisis, s well s in tckling future crises. Furthermore, the institution-uilding tht is focused upon during times of crisis would lso e eneficil during oom times, so s to del with structurl weknesses in the lour mrket nd to ensure smoother execution of pulic investment. A. In the second qurter of 2009, the impct of the crisis on lour mrkets deepens The fll in economic ctivity oserved since lte 2008 continued to mke itself felt in the worsening of lour conditions in the region s countries in the second qurter of The economic decline hs ecome more visile for ll economies under considertion since the first qurter of 2009, with n verge estimted decrese in GDP of -2.6% (following slight increse of 1.2% in the finl qurter of 2008). Out of the nine countries on which this Bulletin includes detiled informtion, the following four posted negtive economic growth rtes: Brzil, Chile, Colomi nd Mexico. The most drmtic decline ws in Mexico (-8.0%), while Argentin, the Bolivrin Repulic of Venezuel, Ecudor, Peru nd Uruguy recorded slightly positive growth rtes. Generlly speking, much of the economic downturn ws the result of the decline in externl demnd nd the resulting trnsmission to the domestic mrket. The domestic mrket hs een ffected in terms of investment nd privte consumption, s the finncil crisis nd the loss of confidence invded the cpitl mrkets nd went on to dversely ffect the expecttions of households. In some of the region s countries, the slowdown in privte consumption is going hnd in hnd with reduction in migrnt remittnces (with decline of etween 13% nd 2 The Employment Outlook Survey on hiring nd lyoffs crried out y the compny Mnpower (2009) shows cler improvement in the hiring outlook of the seven Ltin Americn countries covered for the fourth qurter (in reltion to the previous qurter), lthough the yer-on-yer comprison remins lrgely negtive. 19% in the second qurter of 2009 in Colomi, El Slvdor, Guteml nd Mexico). As result, most countries recorded flls in industril production, oth for foreign mrkets (such s mquil) nd domestic mrkets. Construction, which hs een one of the most uoynt sectors in previous yers, lso contrcted severely. Certin countries, especilly those in Centrl Americ, the Crien nd Mexico, sw tourist ctivity decrese s result of shrinking interntionl demnd, s well s the influenz A(H1N1) epidemic. The prtil informtion ville for the second qurter of 2009 shows tht the decline is ongoing in mny countries. Annul vritions in GDP for the second qurter show flls of 0.8% for Argentin, 2.4% for the Bolivrin Repulic of Venezuel, 1.2% for Brzil, 4.5% for Chile, 0.5% for Colomi,10.3% for Mexico nd 1.1% for Peru while the Uruguyn economy expnded slightly, 0.2%. Nevertheless, the region s leding economy, Brzil, which hd undergone drmtic slowdown in the fourth qurter of 2008 nd the first qurter of 2009, showed recovery in output during the second qurter of the yer (in reltion to the previous qurter). Given tht ctivity did not pick up in the second qurter, nd tht severl countries posted even lower yer-on-yer growth rtes, it should come s no surprise tht jo cretion ws not s uoynt s it usully is t this time of yer in these countries s whole for sesonl resons. Indeed, etween the first nd second qurters the employment rte only edged up slightly y 0.1 percentge points nd the unemployment rte remined constnt t 8.5% (see figures 1 nd 2).

5 ECLAC / ILO Bulletin 5 Figure 1 LATIN AMERICA (9 COUNTRIES): EMPLOYMENT AND UNEMPLOYMENT RATES, FIRST QUARTER OF 2006 TO SECOND QUARTER OF 2009 Employment rte Q Q2 Q3 Q Q1 Q2 Employment rte Q Q Q1 Q Q3 Q Q1 Unemployment rte Lour Orgniztion (ILO), on the sis of officil figures from household surveys conducted in the relevnt countries Figure 2 LATIN AMERICA (9 COUNTRIES): UNEMPLOYMENT RATE BY QUARTERS, FIRST QUARTER OF 2003 TO SECOND QUARTER OF 2009 Q Unemployment rte According to sesonlly djusted mesurements, only three of the nine countries under considertion (Bolivrin Repulic of Venezuel, Colomi nd Peru) recorded increses in their employment rtes etween the first nd second qurters of 2009, wheres Argentin, Brzil, Chile, Ecudor, Mexico nd Uruguy posted flls in the employment rte, s result of wek lour demnd tht reflected the decrese in economic ctivity (see tle 1). The yer-on-yer decline in the unemployment rte therefore worsened, with reduction of 0.5 of percentge point in the first qurter of 2009 nd 0.9 of percentge point in the second. Tle 1 LATIN AMERICA (9 COUNTRIES): URBAN EMPLOYMENT AND UNEMPLOYMENT RATES, SEASONALLY ADJUSTED, FOURTH QUARTER OF 2008 TO SECOND QUARTER OF 2009 Urn employment rte Urn unemployment rte Q Q Q Q Q Q Argentin Brzil Chile Colomi Ecudor Mexico Peru Uruguy Venezuel (Bol. Rep. of) Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries. Note: Sesonl djustment is crried out with monthly dt for the Bolivrin Repulic of Venezuel, Brzil, Chile, Mexico, Peru nd Uruguy, nd with qurterly dt for Argentin nd Ecudor. The employment rte for the second qurter of 2009 is n estimte. Includes hidden unemployment. Unemployment rte I II III IV Qurter Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries The worsening of the lour sitution in the second qurter cn e seen clerly in the sesonlly djusted unemployment rte. In seven of the nine countries, this rte incresed, with the only exceptions eing Brzil nd Peru (where the rte dipped slightly y 0.2 nd 0.1 percentge points, respectively). The lrgest increses in the sesonlly djusted unemployment rte were in Mexico (1.3 percentge points), Argentin (0.8 of percentge point), Chile (0.7 of percentge point) nd Uruguy (0.6 of percentge point). The yer-on-yer comprison shows tht, unlike the first qurter, which sw some countries mintin or even reduce their unemployment levels, 3 in the second qurter of 2009 the unemployment rte rose cross the ord. As result, the regionl yer-on-yer increse in the unemployment ws greter in the second qurter of 2009 (+1.0 percentge points) thn in the first qurter (+0.6 percentge points). 3 In the first qurter of 2009, Argentin nd Peru posted the sme unemployment rte s in the yer-erlier period, while the Bolivrin Repulic of Venezuel nd Uruguy posted decrese nd the rte rose in ll other countries. See ECLAC/ILO (2009).

6 6 ECLAC / ILO Bulletin B. Generl overview for the first hlf of 2009 Dt from the first six months of the yer flesh out the difficult sitution in lour mrkets, which is the result of the decline in economic ctivity in most of the region s countries. Unemployment is up mong women, men nd young people of oth sexes; these re losses in working hours ecuse of mrket fctors; forml jo cretion is wek; socil protection is ecoming scrcer; nd there re differentil trends in worker wges nd income. 1. Employment plummets drmticlly At the regionl level, the employment rte fell from 55.1% in the first hlf of 2008 to 54.4% in the sme period of 2009 (see tle A-3). The pttern vried cross countries. The most drmtic yer-on-yer flls were oserved in Brdos, Chile, Ecudor, Jmic nd Mexico, while the reductions were smller in Brzil nd Peru, nd the rte is estimted to hve remined constnt in Argentin. On the other hnd, the employment rte rose in the Bolivrin Repulic of Venezuel, Colomi, Trinidd nd Togo nd Uruguy (see figure 3) Figure 3 LATIN AMERICA AND THE CARIBBEAN (12 COUNTRIES): URBAN EMPLOYMENT RATE, FIRST HALF OF 2008 AND in the unemployment rte. As in previous periods, in most of the countries tht oserved fll in their overll prticiption rte, this ws linked to shrp decline in the prticiption rte mong men, while the femle prticiption rte either dropped y less or even incresed. Indeed, in terms of the weighted verge for countries with informtion on the first hlf of the yer, the mle prticiption rte dropped y 0.5 percentge points, while the femle prticiption rte rose y 0.1 percentge points. 4 These results show continution of the long-term trend of nrrowing gp etween mle nd femle lour prticiption (see tle A-4 in the sttisticl nnex) Figure 4 LATIN AMERICA AND THE CARIBBEAN (12 COUNTRIES): URBAN PARTICIPATION RATE, FIRST HALF OF 2008 AND Argentin Brdos c Brzil Chile Colomi Ecudor Jmic Mexico Peru Trinidd Uruguy Venezuel nd Togo c (Bol. Rep. of) Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries (tle 3-A of the sttisticl nnex). For Brdos, the Bolivrin Repulic of Venezuel, Chile, Jmic nd Trinidd nd Togo, the ntionl totl is used. Estimtes for the first hlf of c First qurter. The prticiption rte lso differed mong countries, with rises in Argentin, the Bolivrin Repulic of Venezuel, Colomi, Trinidd nd Togo nd Uruguy, wheres the rte decresed in Brdos, Ecudor, Jmic, Mexico nd Peru, nd lso to lesser extent in Brzil nd Chile (see figure 4). The slight drop in lour prticiption t the regionl level reduced the increse Argentin Brdos c Brzil Chile Colomi Ecudor Jmic Mexico Peru Trinidd Uruguy Venezuel nd Togo c (Bol. Rep. of) Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries (tle 2-A of the sttisticl nnex). For Brdos, the Bolivrin Repulic of Venezuel, Chile, Jmic nd Trinidd nd Togo, the ntionl totl is used. Estimtes for the first hlf of c First qurter. 4 Owing to lck of dt, this clcultion does not include Argentin. The dt re therefore not completely comptile with the overll prticiption rte clculted for ll nine countries.

7 ECLAC / ILO Bulletin 7 Furthermore, in the few countries with informtion for the prticiption rte disggregted y ge group, lour prticiption mong young people hs dropped. In Brzil nd Peru, for instnce, the fll in the prticiption rte recorded in the first hlf of 2009 ws due to reduced youth prticiption, while dult prticiption incresed. In Mexico, youth nd dult lour prticiption oth fell, with lrger decrese mong the former thn the ltter. These trends were oserved even in countries where the totl prticiption rte rose, such s the Bolivrin Repulic of Venezuel, where the youth prticiption rte dropped nd the dult rte incresed. In summry, the dt suggest tht, within the current lour sitution, the regionl prticiption rte is determined y two opposing trends: reduced lour prticiption mong young people nd incresed lour prticiption mong women. Although more informtion is required to confirm this, in the cse of young people, such trends my e due to their eing discourged from seeking work given the more limited opportunities ville. It would lso e vitl to check whether more young people re remining longer within the eduction system. In the cse of women, the long-term upwrd trend is mintined. 2. Unemployment rises in lmost ll countries The pttern of employment trends nd lour supply hs generted n urn unemployment rte tht hs risen from 7.7% in the first hlf of 2008 to 8.5% in the first six months of The unemployment rte thus rose in nine of the twelve countries with informtion ville, while in Trinidd nd Togo nd Uruguy the rte dipped slightly nd in the Bolivrin Repulic of Venezuel the six-monthly rte remined the sme (see figure 5). 5 Indeed, in Brdos, Brzil, Chile, Ecudor, Jmic, Mexico nd Peru, open unemployment rose minly on the ck of wek jo cretion, lthough the impct ws offset y reduced lour supply. In Argentin nd Colomi, the rises in the unemployment rte were the result of incresed lour supply, s the employment rte did not vry in the former, nd did not rise enough in the ltter to offset the increse in supply. In Trinidd nd Togo nd Uruguy, unemployment dropped ecuse the increse in employment ws slightly lrger thn the rise in lour supply. In the Bolivrin Repulic of Venezuel, the unemployment rte ws the sme in the first hlf of 2009 s in the first six months of 2008, s lour prticiption nd employment expnded to the sme extent. In the eight Ltin Americn countries with unemployment informtion y sex for the first hlf of 2009, the femle unemployment rte ws 1.4 times higher thn the rte mong men (with the lrgest gp in Uruguy (1.8 times higher) nd the smllest in Mexico (0.9 times higher)). Despite these differences, in the current lour sitution men tend to experience greter increses in unemployment thn women. In countries where totl unemployment hs risen, the rte incresed y more mong men in Brzil, Chile, Mexico nd Peru. In Ecudor, on the other hnd, the increse ws greter mong women. In the Bolivrin Repulic of Venezuel, Jmic nd Uruguy, the mle unemployment rte rose nd femle unemployment dropped (see figure 6). In the weighted verge of these countries, men s unemployment rte rose from 6.4% to 7.4%, while the rte mong women incresed from 9.7% to 10.2% Figure 5 LATIN AMERICA AND THE CARIBBEAN (12 COUNTRIES): URBAN UNEMPLOYMENT RATE, FIRST HALF OF 2008 AND Argentin Brdos Brzil Chile Colomi Ecudor Jmic Mexico Peru Trinidd Uruguy Venezuel nd Togo (Bol. Rep. of) Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries (tle 1-A of the sttisticl nnex). For Brdos, the Bolivrin Repulic of Venezuel, Chile, Jmic nd Trinidd nd Togo, the ntionl totl is used. First qurter. 5 In the Bolivrin Repulic of Venezuel nd Uruguy, the yer-on-yer comprison showed decrese in unemployment for the first qurter of 2009, ut in the second qurter the unemployment rte ws higher thn in the yer-erlier period.

8 8 ECLAC / ILO Bulletin Unemployment rte Men Figure 6 LATIN AMERICA AND THE CARIBBEAN (9 COUNTRIES): URBAN UNEMPLOYMENT RATE, MEN AND WOMEN, FIRST HALF OF 2008 AND Women 6.8 Men Women Men Women Men Women Men Women Men Women Men Women Men Women Men Women two percentge points in countries such s Chile, Colomi, Mexico nd Peru, nd levels remined unchnged in Uruguy only (see figure 7). In the few countries with informtion on the unemployment rte y ge group, the youth unemployment rte is lmost triple the dult unemployment rte (which is similr to wht ws oserved efore the crisis). Figure 7 LATIN AMERICA AND THE CARIBBEAN (7 COUNTRIES): URBAN YOUTH UNEMPLOYMENT RATE, FIRST HALF OF 2008 AND Brzil Chile Colomi Ecudor Jmic Mexico Peru Uruguy Venezuel (Bol. Rep. of) Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries. For the Bolivrin Repulic of Venezuel, Chile nd Jmic, the ntionl totl is used Brzil Chile Colomi Mexico Peru Uruguy Venezuel (Bol. Rep. of) A significnt proportion of the cost of incresed jolessness is eing pid y young people, s youth unemployment hs surged upwrds. The rise in employment in the first hlf of 2009 in reltion to the yer-erlier period ws more thn Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries. For the Bolivrin Repulic of Venezuel, Chile nd Mexico, the ntionl totl is considered. 3. Employment qulity flls One of the expected effects of the decline in ctivity is weker growth of wged work, prticulrly in the privte sector. A comprison etween the first hlf of 2008 nd the first six months of 2009 therefore revels slowdown in the growth of wged work in five of the six countries with informtion ville (see tle 2). In Chile, Colomi (ntionwide) nd Peru, the growth rte is negtive lthough in Colomi this trend is more reflection of fll in wged employment in the pulic sector thn in the privte sector. At the sme time, the growth in own-ccount working tended to prtilly offset the slower growth in wged work, prticulrly in countries such s the Bolivrin Repulic of Venezuel, Chile, Colomi nd Peru. Nonetheless, the growth rte of own-ccount working did fll in most countries with informtion ville for compring the first six months of 2009 with the yer-erlier period. These chnges in the growth of employment y occuptionl ctegory could point towrds certin trend towrds informliztion of the lour mrket (on the ssumption tht lrge proportion of informl usinesses or enterprises re run y own-ccount workers). There lso seems to e n incresing lck of jo security, judging y the fct tht growth in socil-security protected employment hs slowed down in ll countries with informtion ville, with Cost Ric nd Mexico even showing negtive yer-on-yer vritions in protected employment in recent months (see figure 8). From the sectorl perspective, in countries with informtion ville the mnufcturing industry hs een the most ffected y the decline in employment in the first hlf of 2009, with flls in the numer of employed in Brzil, (-2.0%), Chile (-1.4% t the ntionl level), Colomi (-0.9 in 13 metropolitn res), Mexico (-7.0%) nd Peru (-2.7%). The numer of employed hs lso dropped in the construction sector in the Bolivrin Repulic of Venezuel (-5.3%), Chile (-4.2%) nd Mexico (-2.4%) nd in commerce in Chile (-1.0%), Mexico (-0.8%) nd Peru (-3.1%).

9 ECLAC / ILO Bulletin 9 Country Tle 2 LATIN AMERICA (6 COUNTRIES) YEAR-ON-YEAR RATES OF VARIATION IN EMPLOYMENT, BY EMPLOYMENT CATEGORY AND SECTOR OF ECONOMIC ACTIVITY, FIRST HALF OF 2008 AND 2009 Employed Occuptionl ctegories Wged Own-ccount Mnufcturing industry Construction Sector of economic ctivity Commerce Agriculture, livestock nd fishing Other Brzil (six metropolitn regions) Chile (ntionl) Colomi Ntionl metropolitn res Mexico (ntionl) Ntionl urn res Peru (Metropolitn Lim) c 2.0 c Venezuel (Bol. Rep. of) (ntionl) Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries. Includes mining, electricity, gs nd wter, trnsport nd communictions, finncil services, community nd socil services. Includes the extrctive nd processing industries nd the production nd distriution of electricity, gs nd wter. c Includes ll non-wge workers. Yer-on-yer growth rte (t/t-12) Figure 8 LATIN AMERICA AND THE CARIBBEAN (7 COUNTRIES): RATE OF VARIATION IN EMPLOYMENT COVERED BY SOCIAL SECURITY, JANUARY 2008 TO JUNE This is to e expected s declining ggregte demnd would understndly result in compnies in the forml sector first djusting the workdy y reducing it, efore reviewing wge levels or reducing stffing levels (see figure 9) Figure 9 LATIN AMERICA (6 COUNTRIES): UNDEREMPLOYMENT RATE DUE TO INSUFFICIENT HOURS, FIRST QUARTER OF 2007 TO SECOND QUARTER OF Jn 2008 Fe 2008 Mr 2008 Apr 2008 My 2008 Jun 2008 Jul 2008 Aug 2008 Sep 2008 Oct 2008 Nov 2008 Dec 2008 Jn 2009 Fe 2009 Mr 2009 Apr 2009 My 2009 Jun Brzil Chile Cost Ric Mexico Nicrgu Peru Uruguy Source: Economic Commission for Ltin Americ nd the Crien (ECLAC) nd Interntionl Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries. One dditionl cost of the lour mrket decline is the loss in working hours, which is reflected in n insufficient numer of hours worked, nd this pushes up the proportion of the employed popultion working shorter workdy (while wnting to work more hours). The informtion ville for six countries shows tht underemployment due to n insufficient numer of hours worked in the first few months of 2009 ws higher thn in the yer-erlier period, with the trend eing more cute in Mexico nd vrile cross the other countries Q1 Q2 Q3 Q Q1 Q2 Q3 Q Q1 Q2 Brzil Chile Colomi c Ecudor d Mexico e Peru f Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries. Employed who work less thn 40 hours week nd wish to work more (six metropolitn regions). Employed who work less thn 35 hours week nd wish to work more (ntionl totl). c Employed who work less thn 48 hours week nd wish to work more (13 metropolitn res). d Employed who work less thn 40 hours week nd wish to work more (ntionl urn figures). e Employed who re willing nd le to work more hours thn their current jo llows (ntionl totl). f Employed who work less thn 35 hours week nd wish to work more (Metropolitn Lim).

10 10 ECLAC / ILO Bulletin Informtion for eight countries of Ltin Americ shows tht the ptterns of rel wges in forml employment remin vrile, in context of downwrd infltion. Despite wek lour demnd, the purchsing power of rel wges rose stedily in Nicrgu nd Uruguy, nd more modertely in Brzil nd Chile. This seems to e ecuse wges do not usully decrese in nominl terms nd re indexed to pst infltion in context of flling infltion (not to mention the impct of the rise in minimum wges). Nevertheless, this pttern does not pper to hve influenced mny of the wge greements in Colomi, Mexico, Peru nd, ove ll, in the Bolivrin Repulic of Venezuel, where infltion remins reltively high nd the purchsing power of wges continued to fll (see figure 10). Yer-on-yer growth rte Figure 10 LATIN AMERICA (8 COUNTRIES): YEAR-ON-YEAR VARIATION IN AVERAGE REAL WAGES FOR FORMAL EMPLOYMENT, FIRST HALF OF Brzil Chile Colomi Mexico Nicrgu Peru Uruguy Venezuel (Bol. Rep. of) Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries. Py in the mnufcturing industry (including coffee threshing). Py in the mnufcturing industry. C. Pulic investment nd emergency employment progrmmes s mens of tckling the crisis In crisis situtions such s the current regionl context, pulic investment hs ecome key component of countercyclicl pckges tht seek to prtilly offset the fll in economic ctivity within the privte sector. Mny countries hve incresed the mounts llocted nd executed in reltion to yers prior to the crisis. 6 In response to the crisis, the region s countries re estimted to hve incresed the lloctions for pulic investment y n verge of 20%. 7 Wht is more, certin countries re ttempting to prioritize those investments tht hve the gretest effect on jo cretion nd/or to replce mchinery with lour in given project. At the sme time, emergency employment progrmmes re eing used to tckle the crisis, lthough mny countries re mking less use of them thn in previous crises. These progrmmes involve creting temporry jos for the unemployed, usully in the form of work to uild or mintin socil utility infrstructure, 8 hence their similrity with progrmmes sed on pure pulic investment. The experiences of the region s countries in terms of pulic investment nd emergency employment progrmmes cn e used to identify exmples of good prctice, s well s to pinpoint some key issues for progrmme design nd execution. 6 See ECLAC (2009). 7 See Schwrtz, Andres nd Drgoiu (2009). 8 See Reinecke (2005) for definitions nd clssifiction of emergency employment progrmmes implemented in some of the region s countries in the 1990s nd t the eginning of this decde. In this Bulletin, the nlysis of emergency employment progrmmes is limited to direct jo cretion progrmmes, nd does not include indirect progrmmes such s hiring susidies.

11 ECLAC / ILO Bulletin Incresing pulic investment nd the chllenge of execution In response to the crisis, most of the region s countries hve implemented countercyclicl economic policy pckges tht hve usully included mesures designed to reduce txes while incresing spending nd investment. 9 According to the relevnt interntionl literture, incresing pulic spending tends to hve greter impct on jo cretion nd economic recovery thn lowering txes. 10 In mny cses, incresing spending cn lso produce more fvourle results from the viewpoint of socil justice. However, mesures to rise spending nd pulic investment fce greter chllenges thn tx-reduction mesures in terms of the speed of implementtion. The pce t which jos cn e creted through pulic investment or emergency employment progrmmes depends on institutionl cpcities nd erlier experience in those res (i.e., it is esier to dd resources to n existing progrmme thn to crete new one). Severl countries hve found it reltively esy to llocte more resources, s they hve een le to llocte oth their own resources (ville s result of prudent fiscl policy implemented in the recent oom times tht in some cses led to uild-up of reserves) nd resources from lons grnted y finncil coopertion institutions. 11 Since efore the crisis, indeed, since 2007, Brzil hd strted to implement the Growth Accelertion Progrmme (PAC), which includes lrge pulic investment component. One of the responses to the crisis ws to llocte more resources to the Progrmme, y ringing forwrd to 2009 certin investments scheduled for Prguy lso llocted incresed resources to pulic investment, minly through dditionl credit from interntionl finncil coopertion institutions (including the World Bnk nd the Inter-Americn Development Bnk (IDB)). Similrly, Peru llocted more resources to pulic investment s prt of its economic stimulus pln. In Argentin, the Pln of Pulic Works for ll Argentinins provides for n increse in resources for infrstructure works in response to the crisis. The 2009 udget estimted outlys of US$ 8.5 illion, to which US$ 6.2 illion hve een dded. Pulic investment progrmmes in rods nd other strtegic sectors hve een lunched in severl Crien countries such s the Bhms, Belize, Jmic nd Trinidd nd Togo. Nonetheless, in the short term it is much esier to llocte dditionl resources thn execute them. This is why severl countries (including Chile, Prguy nd Peru) specificlly mention the stremlining of pulic tender procedures s prt of the set of mesures to comt the crisis. As result, severl countries hve mnged to significntly increse pulic investment, lthough the originl level ws extremely low in some cses (see tle 3). 12 Tle 3 LATIN AMERICA (6 COUNTRIES): CENTRAL GOVERNMENT CAPITAL EXPENDITURE, FIRST HALF OF 2008 AND 2009 (Percentge of GDP) 1 st hlf of st hlf of st hlf of Rel yer-on-yer 1 st hlf of 2008 Argentin Brzil c Chile c Mexico d Peru c Uruguy e Lour Orgniztion (ILO), on the sis of officil figures from the relevnt countries. Note: Although government cpitl expenditure covers not only gross cpitl formtion ut lso trnsfers such s those to decentrlized governments nd pulic enterprises, it is used s proxy for pulic investment. Estimte. Ntionl non-finncil pulic sector. c Centrl Government. d Pulic sector. e Non-finncil pulic sector. Some exmples will etter illustrte the progress mde in executing pulic investment resources nd the effects on employment. The experience of Prguy shows tht the verge effective execution of pulic investment in 2008 nd previous yer ws rely ove 50% of wht ws udgeted, nd the min short-term chllenge is therefore the full execution of ville resources rther thn the lloction of dditionl resources. As result, the Minister of Pulic Works nd Communictions nd the Minister of Finnce nnounced specil efforts to speed up execution, without ny legl chnges to the regultory frmework within which the resources re executed. These efforts hve resulted in 34% increse in pulic investment execution (which mounted to US$ million) etween Jnury nd June 2009 compred with the yer-erlier period. If this result is projected for the entire yer, the effect of incresed execution (with no dditionl projects or incresed use of lour in investment) 9 See ECLAC (2009). 10 See Jh (2009). 11 However, mny Centrl Americn nd Crien countries did not hve much fiscl room for mnoeuvre or esy ccess to externl finncing, nd this mde it difficult for them to implement countercyclicl fiscl policies. 12 Dt coverge vries y country.

12 12 ECLAC / ILO Bulletin would e to crete round 6,500 jos over the yer s whole. If the 2009 udget were implemented in its entirety, 16,000 more jos would e creted thn in 2008 (which is the equivlent of lmost 10% of the unemployed t the end of tht yer). Chile lso successfully incresed pulic investment execution. In the first hlf of 2008, 47.6% of the udget ws executed, wheres this figure rose to 55% for the first six months of Chile therefore hs one of the est records for executing llocted resources. The Chilen uthorities estimte tht round 125,000 jos re directly linked to the execution of pulic investment. 13 In Brzil, execution in the first qurter of 2009 ws 20% higher thn in the first qurter of Similrly, lthough execution remins reltively low in Peru compred with resources udgeted, the volume of pulic investment executed in tht country etween Jnury nd April ws 72% higher thn in the sme period of Choosing works tht re more lour-intensive For the purposes of jo cretion, it is clerly not only mtter of how much investment is executed, ut lso the percentge of the investment used to hire lour. In this sense, some countries hve nnounced their intention to prioritize lourintensive pulic investments (such s Argentin, the Dominicn Repulic nd El Slvdor). The chllenge of using high percentge for lour is tht most countries do not yet hve explicit mechnisms or criteri for prioritizing more lour-intensive pulic works in times of crisis. As result, works re often crried out in sectors tht hve strtegic importnce for future economic development (such s investments in the petroleum sector s prt of Brzil s Growth Accelertion Progrmme or the moderniztion of the interntionl irport in the Bhms), nd re more intensive in cpitl goods thn in lour. Activities such s rod mintennce, on the other hnd, hve mjor effect on jo cretion, s up to 90% of resources re used to hire lour. 14 Furthermore, works in developing countries tend to e executed with more mchinery nd less lour thn would e socilly desirle, especilly in crisis tht includes lourmrket prolems. This is why ILO is providing ssistnce to governments to increse the prticiption of micro-enterprises nd jo cretion through improvements to project design, idding procedures nd the regultory frmework for pulic tenders. The impct on the locl economy nd employment cn lso e incresed through the use of loclly produced inputs, such s tiles insted of zinc (clmine), reeze locks rther thn ricks nd wood insted of iron, etc. In the short term, it is usully difficult to develop the institutionl cpcity required if this ws not concern prior to the crisis. One possile mesure is to execute pulic investment in decentrlized wy, through deprtmentl, provincil or municipl governments. Decentrlized pulic investment hs dvntges over execution crried out y centrl government ministries. Some of these dvntges re prticulrly relevnt in times of crisis. First, decentrlized decision-mking processes usully mke the locl popultion more committed to the works nd the proper use nd mintennce thereof. Second, the works undertken re usully on smller scle nd involve less expensive tenders, which mens there is less need for hevy mchinery nd greter jo cretion for the mount invested. Third, decentrlized tenders re more likely to e executed y locl firms using workers from the re, nd this will oost the locl economy. The min ostcle to tpping into the potentil of executing pulic investment in decentrlized wy is the limited mngement cpcity tht often chrcterizes territoril institutions, compred with centrl government ones. The udgetry execution rules re frequently complex, which mens tht decentrlized institutions often need trining to mke proper use of resources. In response to the crisis, the centrl government of Prguy is opting for lour-intensive investment projects in municipl infrstructure through two decentrlized pulic investment progrmmes in ddition to the decentrlized investment tht is lredy eing executed with municipl or locl government resources. First, greements were signed etween the intionl energy entities Itipú nd Yciretá nd the Ministry of Finnce nd the governments of six deprtments to llocte totl of US$ 6 million (US$ 1 million per deprtment). Under these greements, the Government will develop projects tht require 14 See Schwrtz, Andres nd Drgoiu (2009). It is precisely on routine rod mintennce tht ILO hs focused its technicl support to optimize jo cretion s prt of pulic investment execution, t the sme time s improving rod mngement with ovious enefits for the popultion (especilly in rurl res). 13 See Ministry of Finnce nd Ministry of Lour nd Socil Security (2009). 14 See Schwrtz, Andres nd Drgoiu (2009). It is precisely on routine rod mintennce tht ILO hs focused its technicl support to optimize jo cretion s prt of pulic investment execution, t the sme time s improving rod mngement with ovious enefits for the popultion (especilly in rurl res).

13 ECLAC / ILO Bulletin 13 mssive work force, such s the construction of loose surfces, pving, ridges, sewers, retining wlls, urn constructions nd similr works, including repirs tht generte lrge lour demnd. Second, s prt of dditionl lons tht the Ministry of Finnce rrnged with the World Bnk, US$ 34 million is eing llocted to decentrlized pulic investment in ech of the country s 17 deprtments (US$ 2 million per deprtment). Implementing these two decentrlized progrmmes over 12-month period would crete round 4,800 jos yer. In Argentin, the Ntionl Strtegic Investment Pln for Development includes clssifiction of works where the mngement system vries ccording to their type nd size. This ensures tht most smll- nd medium-scle works re executed in decentrlized wy, with specil emphsis on lour intensity in the smller scle projects. In its first few dys in office in El Slvdor, the Government of President Muricio Funes nnounced counter-crisis pln tht, for the purposes of intensive jo cretion, includes plns to extend nd improve pulic services nd sic infrstructure in terms of wter nd snittion, rurl rods, risk mitigtion works, electricity, schools, helth centres nd the construction nd improvement of low-cost housing. The intention is to step up pulic investment to generte jos nd promote locl development, s well s to oost locl micro- nd smll enterprises y giving them ccess to Stte procurement nd tenders, comined with ccess to credit, trining nd technicl ssistnce. In El Slvdor s elsewhere, ILO hs een providing technicl ssistnce to devise policy for intensive jo cretion in pulic investment nd to design nd implement pilot project in which microenterprises crry out routine rod mintennce. In this context, works executed s prt of emergency employment progrmmes re usully t the opposite extreme, in other words the percentge of resources llocted to mchinery nd mterils is so low tht there cn e prolems in terms of the suitility, qulity nd sustinility of work crried out if steps re not tken to ensure n pproprite use of mterils nd proper oversight. Although emergency employment progrmmes hve een used less during this crisis thn in other crises tht occurred in the region over the pst few decdes, they do ply n importnt role in certin countries. For instnce, Mexico hd temporry employment progrmme even efore the crisis, nd this ws modified nd expnded in the light of the current climte. The chnges included extending the territoril coverge (to include urn res) nd incresing the volume of resources invested nd the numer of plces. Between Jnury nd July 2009, 505,808 men nd women enefited from the progrmme. In most cses, the project durtion is shorter thn the mximum six months llowed. 15 The operting rules of the progrmme set the percentge of the udget used for lour t 65%, while 28% is 15 In some cses, the sme eneficiries re-register or others leve ecuse they find employment. llocted for mchinery nd mterils nd 7% for dministrtion nd ssessment. 16 This ensures lnce etween the need to chnnel high percentge into the workforce to mke n impct on the lour mrket during the crisis, nd the vilility of mchinery nd mterils to enle high-qulity works to e produced. Chile lso opted for direct jo cretion progrmmes, nd hs incresed the numer of plces in progrmmes tht existed efore the crisis. In June 2009, 41,605 people were prticipting in direct employment progrmmes, compred with 25,222 in the sme month of The most importnt progrmme, Investment in the Community (which comes under the Deprtment of Trnsport), ccounts for round hlf of eneficiries. As result of the summit on ntionl unity in the fce of the world economic crisis, orgnized y the Government of the Dominicn Repulic in erly Jnury 2009, the country pproved temporry employment progrmme, 17 whose im is to generte productive temporry jos (of etween three nd six months), with priority given to mle nd femle heds of household in poor communities, to crry out works nd socil services of interest to communities. Efforts re lso under wy to devise nd implement n emergency employment progrmme, so s to encourge pulic nd privte investment in construction. 18 El Slvdor s counter-crisis pln provides for income protection under the temporry income progrmme, which is eing designed with the support of the World Bnk to comine work nd trining. The im of the progrmme is to help temporrily protect the income of the most vulnerle urn households y providing monetry support to eneficiries in exchnge for prticiption in trining nd work experience. Over period of 18 months, the progrmme is expected to enefit etween 25,000 nd 30,000 prticipnts in urn municiplities selected on the sis of poverty nd precriousness. The scope nd scle of the progrmme my e extended in the future. 19 Despite some weknesses tht re inherent to direct employment progrmmes, they nonetheless complement the increse in investment through trditionl pulic investment chnnels nd help countries to tckle the consequences of the crisis for the lour mrket. The contriution mde y these progrmmes is prticulrly vlule when there is lck of mechnisms to increse the workforce used in pulic investment through prioritiztion system tht includes employment s vrile or mechnisms tht encourge the use of lour insted of mchinery in tendering nd execution of works. 16 See Dirio Oficil de l Federción (2008). 17 The project to crete temporry employment in Sntigo province with support from the World Bnk is in the finl phse of formultion. Implementtion should egin t the end of the yer nd will generte round 4,200 temporry jos (lsting three to six months), nd my susequently e expnded to other res. 18 For more informtion on the summit in the Dominicn Repulic see [online] (Spnish only). 19 Besides the cses mentioned here, different forms of emergency employment progrmmes lso exist in Argentin, Cost Ric, Peru, the Plurintionl Stte of Bolivi nd Uruguy.